India Stocks Review:End lower as concern rises over state of economy

MUMBAI – Benchmark indices ended lower, although slightly off their day’s low, as the assessment by the Reserve Bank of India on the economy sparked concerns that the impact of the nationwide lockdown to contain the pandemic has been worse than earlier believed.

“It is in the growth outlook that the MPC (Monetary Policy Committee) judged the risks to be gravest. The combined impact of demand compression and supply disruption will depress economic activity in the first half of the year,” said RBI Governor Shaktikanta Das in his statement today.

Despite the dour assessment of the economy, the Monetary Policy Committee, in its advanced meeting, voted for a 40-basis-point cut in repo rate, which underwhelmed investors.

“They are still relying on old school tools for an unprecedented and desperate situation…,” said a city-based portfolio manager.

Further, RBI’s decision to extend moratorium on loan repayments by three more months till Aug 31 spooked shareholders of banks as it led to the perception that the stress in the loan book could be more than what it was expected.

Investors were also concerned that margins of banks will come under pressure after the central bank cut its reverse repo rate by 40 bps to 3.35% because in the absence of credit offtake in the economy, banks have parked trillions of rupees in the reverse repo facility of central banks to earn some return on cash.

The Nifty Bank index ended the session 2.6% lower as it managed to recoup some losses towards the end aided by short covering by some traders ahead of the long weekend.

Cues from global markets were not supportive either for the market as rising tensions between the US and China, and the deteriorating outlook for the Chinese economy weighed on sentiment.

Global investors are increasingly concerned that rising number of COVID-19 cases in developing countries and escalation in US-China tensions, could delay global economic recovery.

Today, the Nifty 50 ended 0.7% lower at 9039.25 points, while the BSE-Sensex closed at 30672.59 points, down 0.8%.

Mahindra & Mahindra Ltd’s stock surged 4.4% after RBI said the agriculture sector has emerged as “a beacon of hope” given the 44% on-year rise in kharif crop sowing so far, which means likely improvement in demand for tractors in the festive season.

Investors, concerned over more losses and volatility in the broader market, bought stocks of defensive sectors such as pharmaceutical and information technology. The Nifty IT index ended 1.4% higher, while the Nifty Pharma closed up 0.8%.

Zee Entertainment Enterprises Ltd’ stock rose 6% on speculation that the company’s over-the-top platform ZEE5 has found increased traction among consumers during the lockdown, while the launch of Nawazuddin Siddiqui’s latest film on the platform also boosted sentiment.

BSE’s stock sunk 8.5% after the company reported a consolidated net loss of 13.1 mln rupees in the March quarter as against a net profit of 518.6 mln rupees a year ago.

The overall breadth of the market was negative as declining stocks outnumbered advancing ones.